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Minutes for October 8, 1956

To:

Members of the Board

From:

Office of the Secretary

Attached is a copy of the minutes of the
Board of Governors of the Federal Reserve System on
the above date.
It is not proposed to include a statement
with respect to any of the entries in this set of
minutes in the record of policy actions required to
be maintained pursuant to section 10 of the Federal
Reserve Act.
Should you have any question with regard
to the minutes, it will be appreciated if you will
advise the Secretary's Office. Otherwise, if you
were present at the meeting) please initial in column A below to indicate that you approve the minutes.
If you were not present) please initial in column B
below to indicate that you have seen the minutes.

Chin. Martin
Gov. Szymczak
Gov. Vardaman
Gov. Mills
Gov, Robertson
Gov. Balderston
Gov. Shepardson

x

20,66
Minutes of actions taken by the Board
of Governors of the Federal Reserve System on Monday,
October

8, 1956. The Board met in the

Board Room at 10:00 a.m.
PRESENT:

Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Martin, Chairman
Balderston, Vice Chairman
Szymczak
Mills
Robertson
Shepardson
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Sherman, Assistant Secretary
Kenyon, Assistant Secretary
Fauver, Assistant Secretary
Vest, General Counsel
Sloan, Director, Division of
Examinations
Solomon, Assistant General Counsel
Hexter, Assistant General Counsel
O'Connell, Assistant General Counsel
Hostrup, Assistant Director, Division of Examinations
Thompson, Supervisory Review Examiner
Division of Examinations

Reference was made to the following draft of letter to Mr. Slade,
Vice President of the Federal Reserve Bank
of San Francisco, which had
been circulated among the members
of the Board:
This will acknowledge your letter of September 14) 1956,
enclosing correspondence from Transamerica Corporation dated
September 12, 1956, in which its Secretary states the Corporation's intention to apply to the Board of Governors for
a determination, pursuant to section 4(c)(6) of the Bank
Holding Company Act, regarding the alleged closely related
activities of its "majority-owned financial, fiduciary and
insurance subsidiaries".
In reference to the questions raised by Transamerica relating to the application for and hearings on such determination, your attention is directed to the Board's recent letter
in response to Mr. John A. O'Kane's telegram of September 14,
which letter contains statements responsive to Transamerica's




10/8/56

-2-

inquiry as to the informat
ion to be included in a request
for determination. As
to the procedural questions posed,
any decision by the Boar
d in this connection will necessarily depend upon possessi
on by it of the information
which heretofore has
been indicated should be submitted
with the application.
Subsequent to the receipt of this
information the Board will
be glad to consider the questions of procedure.
Your attention in this matter, toge
ther with your
offer of transmission, is appr
eciated.
When this file was in circ
ulation, Governor Balderston raised a
question as to whether the
reply should be more directly responsive to
Transamerica's inquiry conc
erning procedures contemplated by the Board;
that is) whether there
would be separate hearings on each subsidiary
or on groups of
subsidiaries, or whether the Board intended to consider
in a single proceeding
all subsidiaries of a bank holding company.
Governor Balderston stated that his question was prompted by the
thought that counsel
for the bank holding company should not be in a
position to say later
that the company could not prepare for the hearings
because it did not
know in which direction the Board was going to move.
In commenting on the poin
t, Mr. Vest recalled that in the Board's
letter of September
28, 1956, to Mr. O'Kane, General Counsel for the Federal Reserve Bank of
San Francisco, an indication was given as to the
nature of the information
that should be submitted by a bank holding company in requesting a
determination pursuant to section
Holding Company Act.

4(c)(6) of

the Bank

It was the thought of the staff, he said, that when

such information was
available the Board would be in a position to decide




206S
lo/8/56

-3-

on the matter of joint or
separate hearings.

He also said that under the

contemplated arrangement the
bank holding company would be given ample
time to prepare for any
hearing following the initial submission of information.
Following further discussion
on the basis of the statement made
by Mr. Vest, the letter to Mr. Slade
was approved unanimously.
There were presented telegrams proposed
to be sent to the following Federal Reserve Banks
approving the establishment without change on
the dates indicated of
the rates of discount and purchase in their existing schedules:
Atlanta
St. Louis
Kansas City
New York
Philadelphia
Chicago

October 1
October 1
October 2
October 4
October 4
October 4

Approved unanimously.
Messrs. Hostrup and Thompson then withdrew from the meeting.
Mr. Hexter, who had just returned from Salt Lake City, Utah, made
a statement concerning
developments in the proceeding against The Continental Bank and Trust
Company of Salt Lake City under section 9 of the
Federal Reserve Act.

He said that on October 1 the Senior Judge of the

Federal District Court in
that city issued at the request of the member
bank a temporary
injunction against Mr. Emery J. Woodall, Hearing Examiner, restraining him
from conducting the hearing on the ground that
it would do irreparable
harm to the bank to hold the public hearing.




2069
10/8/56

-4-

This order was served the followi
ng day and on October 3, the day that
the hearing was scheduled to
begin, Mr. Woodall announced that he was
under a restraining order and
continued the hearing until the next day.
Then an informal hearing was
held before the Federal District Judge, at
the end of which the Judge
ruled in favor of the Board, dissolved the
temporary restraining order, and dismiss
ed the request for a permanent
injunction.

Counsel for Respondent then announced his intention to ap-

peal to the Court of Appeals
for the Tenth Circuit, and Special Counsel
for the Board agreed to
move the Hearing Examiner to postpone the hearing until October

9

in order to give Continental an opportunity to take

whatever steps were necessary
to enable the bank to appeal.

4,

On October

a hearing was held
before Judge Lewis of the Court of Appeals, who

resides in Salt Lake City
and has his offices in that city, since the
Court of Appeals was not
sitting and was not scheduled to meet until
the 12th of November.

The next day the Circuit Judge said that, Without

ruling on the merits of
the case with respect to either jurisdiction or
substance, he was issuing a tempora
ry restraining order against the conducting of the hearing to
run until further order of the Court, but to
expire in any event on
November 16.

Mr. Hexter went on to say that at

present the Board's
Special Counsel, Mr. Powell, was in Salt Lake City
along with General Counsel
for the San Francisco Reserve Bank but that
other witnesses and
counsel had returned to San Francisco and Washington.
There would be a reconve
ning of the hearing tomorrow at which time, unless




2'0'70
10/8/56

-5-

the Board indicated to the
contrary, Mr. Powell intended to move the
Hearing Examiner that the
hearing be adjourned to Washington, D. C.,
at a date perhaps a week
after the termination of the present injunctive proceeding.

He also said that Mr. Powell was considering going

to Albuquerque, New Mexi
co, later this week to meet with the Chief
Judge of the Court of
Appeals and request that a special session of
the Court be convened
before the beginning of the regular session on
November 12.

Mr. Hexter doubted whether such a request woul be gran
d
ted

since he questioned
whether a sufficient showing of emergency need could
be made.
In response to an inquiry
by Governor Robertson regarding the
purpose of adjourning
the hearing to Washington, M. Hexter said the
purpose would be to
avoid the necessity of going to Salt Lake City if
it became necessary
for any reason to continue the hearing further.

How-

ever, if the hearing
was to resume at that time, the hearing in Washington
would be simply for
the purpose of adjourning to a suitable date thereafter in Salt Lake City
.
Mr. Vest said that
out of these developments there appeared to
arise the possibil
ity of a considerable delay since the hearing was already stayed until
November 16 unless the Court of Appeals should act
earlier.

In addition, the
arrangement would extend the time of the hear-

ing until seven days
after final action by any court in this injunction
proceeding.. That would
appear to mean seven days after action by the




2071
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-6-

Supreme Court of the United
States denying certiorari or on the merits,
or seven days after the time
had expired for an application for certiorari
to the Supreme Court.

In the circumstances, Mr. Vest suggested that it

might be well for the Board
to consider instructing the Legal Division
to get in touch with Mr.
Powell and say that, while the matter was left
to his handling and
discretion, if at all possible the matter should be
set down for as early a
date as possible after any restraining order had
been lifted so that the
Board would not be confronted with waiting for
the expiration of the 90
-day period allowed for filing a petition for
certiorari with the Supreme
Court.
After a discussion, it was
agreed unanimously that the procedure suggested by Mt. Vest
should be followed.
Mr. Hexter then withdrew from the meeting.
Consideration next was given to a memorandum from Mr. Vest dated
October

41

1956) copies of which had been sent to the members of the Board,

submitting a draft of Statem
ent and Order proposed to be issued by the
Board in the matter of
The Continental Bank and Trust Company with regard
to Respondent's Motion
for Production of Records and Supplemental Motion
for Production of
Documents and Records.

The proposed Statement and Order

would deny all of the
various items of the two motions except for the following:
List of the last 25 banks in the United States admitted to membership in
the Federal Reserve System, with
copies of their balance
sheets for the last few years, to




2072
10/8/56

-7-

the extent available. (This would
be published information,
although probably not readily available
in convenient form
to Respondent.)
List of 25 member banks of comparable size to Respondent
bank in cities with popula
tion between 150,000 and 300,000,
with annual balance sheets
since 1951, to the extent available.
(This would be published inform
ation, although probably not
readily available in convenient
form to Respondent.)
List of all member banks for the examination of which
George M. Walker, examiner
for the Federal Reserve Bank of
San Francisco, was examin
er-in-charge during any of the last
five years.
The memorandum pointed out
that the proposed denials by the Board were
based primarily on lack
of relevancy, lack of specific designation of
documents desired, and confid
entiality of the documents desired.

It

also pointed out that the
last paragraph of the proposed Statement
would state that
notwithstanding the Board's denial at this time, Respondent would not be
precluded from again raising any of the matters
by bringing them to
the attention of the Trial Examiner on the basis of
subsequent developments or testim
ony at the hearing.
Mr. Vest opened the discussion of the matter by saying that the
staff had considered
whether developments in the case suggested a delay
in passing on the
proposed Order.

It was the feeling, however) that

nothing would be gained
by delaying, while on the other hand a delay
might give rise to
possible criticism on the part of Counsel for Respondent.
Mr. O'Connell then
reviewed the nature of the motions and described the content of
the proposed Statement and Order.

In so doing,

he discussed the ground
s for denial of the various items in the two
motions except as to the
information referred to hereinbefore.



Turning

2O7

10/8/56

-8-

to the third item of
information proposed to be furnished, that is, the
banks for which George M.
Walker had served as examiner-in-charge, Mr.
O'Connell said that the Board'
s legal staff had discussed the matter at
some length and felt that
the information might be relevant to Respondent's
case.

He said the only sugges
tion of privilege was that the inference

might be drawn that Mr.
Walker was assigned particularly to problem banks,
and it had been ascert
ained from the Federal Reserve Bank of San Francisco
that such was not the
case.

Mr. O'Connell went on to say that in the

opinion of the staff any
information that could be furnished without violating privilege or
revealing matters of confidence ought to be furnished,
and the furnishing of
as much information as possible would improve the
record.
After a question had been raised by Mr. Sloan regarding the furnishing of the third
item of information on the basis of possible damnge
to the reputation of
other banks through inferences that might be drawn
by Counsel for
Respondent at the hearing, there ensued a discussion of
the arguments for and
against complying with the request.

The principal

arguments cited in favor
of compliance related to the effect on the Board's
case and the general
principle that the Board should furnish all available
information consistent
with the reservations set forth in Mr. Vest's memorandum.

The main argument
against compliance had to do with the protection

of other System member
banks from the possibility of injustice being done
to them through
assertions that might be made during the course of the
hearing.




)
re,

10/8/56

-9At the conclusion of
the discussion, Governor Robertson stated

that although he doubted
the wisdom of furnishing the requested information regarding the banks
examined by Mr. Walker, he did not feel that
the matter was of suffi
cient importance to warrant his voting against
the issuance of the
Statement and Order in the form proposed.
Thereupon, unanimous approval was
given to a Statement and Order reading
as follows, with the understanding that
copies would be sent to The Continental
Bank and Trust Company, Counsel for the
bank, Special Counsel for the Board, and
the Federal Reserve Bank of San Francisco:
UNITED STATES OF AMERICA
BEFORE THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM
In the Matter of
THE CONTINENTAL BANK
AND TRUST COMPANY
Salt Lake City, Utah.
STATEMENT AND ORDER ON RESPONDENT'S
MOTION FOR PRODUCTION OF RECORDS RELATING TO THIS
PROCEEDING AND SUPPLEMENTAL MOTION FOR PRODUCTION
OF DOCUMENTS AND RECORDS
On September 4, 1956, respondent, The Continental Bank
and Trust Company,
filed herein Motion For Production of
Records Relating to
This Proceeding and on September 21,
1956, Supplemental
Motion For Production of Documents and
Records, together with Memor
andum in Support of both motions. Memorandum in Oppos
ition to Respondent's Motion
For Production of
Records Relating to This Proceeding was
filed herein by speci
al counsel for the Board on September
12, 1956. The Board
will dispose of respondent's motions
in the order mentioned.
In the matter of the production of documents and recor
ds
demanded by a party
to a proceeding conducted before this
Board, the Board is
not required to allow the liberality of




2075
10/8/56

-10-

production presently requi
red by the Federal Rules Civil Procedure rule 34, 28 U.S.C
., sec. 2072. Rule 34 may not be
utilized before an administra
tive agency, Okun v. Kastner, 1
F.R.D. 599 (D.R.I., 1941)
, unless made applicable by some
statute or rule. The appli
cation of the production rule is
not required by any
statute or rule pertinent to this matter.
However, should the eleme
nts of fairness and justice dictate,
the Board would not
hesitate to require production similar to
that available under rule
34 or any other procedural rule.
In all demands such as
that presently under consideration,
the Board has a two
-fold consideration. It must consider the
interest of all parties
in obtaining a hearing conducted without sacrifice of
substantive or procedural rights. On the
other hand, the Board
must give consideration to the interests
of non-parties,
including other banking establishments and the
public, both of which
will be affected by the manner in which
a proceeding of this
kind is conducted. The importance of
this public-interest
consideration is emphasized in the Board's
Rules of Organization,
sec. 8(a) through (d), the effect of
which is to forbid
disclosure by any person, of any unpublished
information of the Board
to anyone, with stated exceptions, unless authorized by
the Board. This discretionary responsibility
is not lightly
exercised. Its use, at all times, is governed
by the factor which
impelled its inception, namely, the public
interest. A balance of the interests enumerated will determine
the matters now befor
e the Board.
Motion for Production
of Records Relating to This Proceeding
Respondent's original motion called for the production of
"any and all minut
es, records, papers, documents, letters and
memoranda contained in
the files of the Board and the files of
each member there
of and in the files of the Federal Reserve Bank
of San Francisco, .
. . ." Respondent purported to narrow its
designation in paragraphs numbered 1., 2. and 3. The Board is
of the opinion that
the motion must be denied on several grounds.
First, we do not
concur in respondent's statement that ". . .
the documents (soug
ht) . . . are incapable of any more specific
designation." The Board
is referred by respondent, on the subject of designatio
n, to "4 Moore, Federal Practice, sec. 34.07",
with the statement
that "The more recent cases are in accord
with . . . the
holdings in the Brown (Brown v. United States,
276 U.S. 134) and
Consolidated RenderifiT(Tonsolidated Rendering
Co. v. Vermont,
207 U.S. 541) cases." In the Brown case, supra,




207
10/8/56

-11-

the subpoena in question commanded producti
on of letters and
telegrams between specified persons during a three-year period
and in reference to specific items listed. The Supreme Court
sustained the validity of this subpoena with the statement,
"But the form of the subpoena aside, it appears from Brown's
own statement that, prior to the issue of the subpoena in
question, a subpoena duces tecum had been directed and served
upon him personally, commanding him to produce the same documents, and that in answer thereto he had appeared before the
grand jury with them . . . . Having produced them once without difficulty and without undue interference with the affairs
of the association, so far
as appears, there is no reason why
he should not produce them
again in response to another subpoena identical in terms." In the Consolidated Rendering Co.
case, supra, the notice to produce requested such books or
papers as related to specified dealings, between named parties,
from January, 1904, to October, 1906. The notice also gave in
detail the dates and amounts of checks and vouchers which the
Company was required to produce. The Board does not find its
position in conflict with the Court's statements on adequacy
of designation when those statements are read in light of the
facts to which they were applied. Further, in reading the
cases cited in 4 Moore Federal Practice, sec. 34.07, previously
referred to, we find further support for our conclusion as to
the insufficiency of respondent's demand. In United States v.
United States Alkali Export Assn., Inc., 7 F.R.D. 256 (D.C. N.Y.
1946), the Court, in defining the scope of the "designation" requirement of the Federal Rules discovery provision, states:
"Most of the decided cases, including those of this district, seem to hold that Rule 34 requires that each document sought to be produced must be designated specifically
with reasonable particularity. A request for all documents
in the possession of an adverse party relating to a particular matter is not sufficiently specific to come within the
requirement of Rule 34."
The same ruling was made
in Callen v. Pennsylvania R. Co., 5 F.R.D.
83 (E.D. Pa., 1946); Forstmann Woolen Co. V. Manufacturers Retail
Men's Stores, Inc., 6 F.R.D. 224, 226 (S.D. N.Y., 19)4.6). Thus,
the
designation of "any and all" documents "relating" to a particular
matter has been held an insufficient designation. Thomas French
&
Sons Ltd. V. Carleton Venetian Blind Co., Inc., 30 F. Supp.
903,
905 E.D. N.Y., 1939 ; Lever Bros. Co. v. Proctor & Gamble Mfg. Co.
et al., 38 F. Supp. 68o, 684 (D. Md., 19)4-1); Hillside Amusemen
t Co.




2077
10/8/56

-12-

v. Warner Bros. Pictures, Inc.,
et al., F.R.D. 260, 262 (S.D.
N.Y., 1944); Ohmer Corp. v. Duncan
Meter Corp., 8 F.R.D. 582
(D.C. Ill., 1948).
Further, in respect to the demand made by respondent in
its paragraph numbered 1.,
the Board finds the material demanded
to be irrelevant in all respect
s to the proceedings instituted,
inasmuch as the Notice of Institution of Proceed
ing and of Hearing Therein, signed by the
Board's Secretary, and properly sealed,
is prima facie evidence of
the vote of the Board, beyond which
respondent may not inquire. In reaching this conclusion, the
Board agrees with the stateme
nt by its special counsel in this
connection, found at pp. 4 and 5 of his Memorandum in Opposition,
and supported by a similar
conclusion reached In the Matter of
Berkshire Knitting Mills, 37 N.L.R.B. 926, holding that a subpoena
duces tecum will not be
issued for the production of documents to
determine motives for filing of charges before the N.L.R.B., such
motives, if any, being irrelevant to the proceedings. The demands
made in paragraphs numbere
d 2. and 3. of respondent's motion fail
for lack of specific designa
tion, as previously explained. "Designated' documents, etc., are those which can be identified with
some degree of particularity. It was surely not intended . . . to
permit a roving inspection of a promiscuous mass of documents
thought to be in the possession, custody and control of the opposing
party." Kenealy v. Texas Co., 29 F. Supp. 502, 503. In addition
to the foregoing reasons
for refusing production of the materials
demanded, the Board holds, in respect to the information demanded
in paragraph numbered 2., in the absence of proper designation and
specificity, and subject to the provisions of the last paragraph
of this Statement, that
the information demanded is confidential,
and thus, on the grounds of privilege, not susceptible to demand
for production. Our reasons for so holding are fully set forth,
infra, in connection with respondent's Supplemental Motion for Production.
For the foregoing reasons, respondent's Motion for Production
will be denied.

Supplemental Motion for Production of Documents and Records
Respondent's paragraph numbered 1. of its Supplemental Motion
for Production of Documen
ts and Records demands the Board produce
a "list of all banks in the United States stating their names
and
addresses, whose capital account (net capital and surplus
funds)
has been considered to
be inadequate in relation to the character




207S
10/8/56

-13-

and condition of their assets and to their present and prospective deposit liabilities and other corpora
te responsibilities . . . within the last ten years, or such shorter
period as for which the records
are available . . . ." In
respect to each of these banks, respondent further demands
copies of balance sheets for each of the past ten years;
copies of "annual operating ratios" for the same years; copies
of ratios of losses on loans and investments for each such
bank for the same years
and finally, as to each bank, disclosure
in respect to twelve specifi matters intimately connected with
c
their financial structu
re, management functions and fiscal policies. Paragraph numbered
2. demands a "list of all banks in
the United States, stating
names and addresses, whose applications for membership in the Federal Reserve System have been
denied for inadequacy of capital within the last ten years, or
such shorter period as
the records may be available, . . . .
In respect to each of these banks, demands are made for information similar to, but somewha
t more limited in scope than that
demanded in paragraph numbered 1., as enumerated, supra.
Paragraphs numbered 1. and 2. of respondent's Supplemental
Motion for Production escape, for the most part, the defense of
lack of designation and specificity to which its original motion
was subject. However, the information which is the object of
designation, is of such nature as to wholly fall within the class
of unpublished, confidential information which, under secs. 8(a)
and (c) of the Board's Rules of Organization, may not be disclosed
except as authorized by said Rules of Organization. The information sought is clearly related to

"Sec. 8 • •
(c) . .
"(1) Examinations, investigations, inspections, or reports of any particular bank . . .", and
"(2) Proceedings in connection with the consideration
of • • • (iii) the granting or termination of membership
in the Federal Reserve
System, . . . (vi) the granting or
termination of permission or authority in other cases in
which public hearing
is not required by statute or Board
regulations.

"(3)

.

u()) Relations between the Board and any Federal Reserve
Bank, • . ., and
internal operations of the Board or any Reserve
Bank, including, among other things, any matters of adminis
tration."




2079
10/8/56

-14-

In sec. 8(d) of its Rules of Organization, the Board sets
forth the reasons for non-disclo
sure of unpublished information.
In that section, there are
stated specific functions of the
Board which, in the public interes
t, must be performed by and
through the Board. Of these, particularly involve
d in the Board's
determination of non-disclosure of the information demanded in
respondent's paragraph numbered 1., are the investigating, examining
and information-gathering functio
ns, and appropriate safeguarding
of information regarding such functions. As set forth
in sec. 8(d),
improper disclosure of such information would ". . . (iii) Unreasonably and unnecessarily disturb and interfere with individual
privacy and confidential busines relations; . . . (v) Impede the
s
Board's necessary collection of information and advice, much of
which cannot be obtaine
d except on a confidential and voluntary
basis; and (vi) Cause misinterpretat
ions and misunderstandings
as to the Board's policie
s and purposes, and as to the status of
particular financial institutions, with resulting . . . impairment
of public confidence
in individual institutions or in the nation's
financial structure." Production of the materials requested by
respondent would, in the opinion of the Board, bring about each of
the aforementioned
harmful results. This conclusion is sufficient
basis for the Board's
action. However, additional support is found
in the language of the
United States Court of Appeals for the District of Columbia in
Bank of America Nat. Trust & Savings Ass'n. V.
Douglas et al., 105 F.2d 100. In that case, plaintiff, a national
bank and member of
the Federal Reserve System, brought suit to prevent members of the Securit
ies and Exchange Commission from making
public disclosure, during hearing, of the reports of bank examiners
made to the Comptro
ller of the Currency with reference to plaintiff
bank, and subsequently furnished to the Commission in connection
with an investigation
of a different bank. After deciding the act
of the Secretary of the Treasur
y in furnishing the Commission with
the reports of the
bank examiners "was not inconsistent with law,"
the court turned to
the question of whether such information should
be used by the
Commission only for the purpose of its investigation
and inquiry, or whether
the information should be subsequently
introduced in evidence or otherwise made public. In this connection, the Court stated:
"According to a practice of long standing, the reports
of bank examiners
made to the Comptroller have been considered as private, and access to them for use by other
government officials has been granted only in tax investigations and criminal prosecutions . . . .
"Other instances to show that by unbroken custom reports of bank examine
rs have been regarded as privileged




20911
10/8/56

-15are (1) the testimony of Chairman Douglas of the Commission in the hearings on the Barkley bill, to the
effect that examiners' report ought not to be made
s
public; (2) the testimony of the Comptroller in the
Pujo investigation that the report
s of examiners had
always been regarded as confidential; (3) legislation
on the subject, where
in each instance in which the
rule was modified, Congre
ss recognized the necessity
of effecting it by expres langua
ge even as to those
s
agencies and instrumentalities authorized to deal
with banks. And to all
of this may be added the uncontradicted testimony that examiners' reports had
never at any previous time been publicly used in any
civil proceeding.
* **

". • . As we have already pointed out, the unbroken
administrative practice of the Secretary and the Comptroller, as well as the course of Congressional legislation, manifests a fixed purpose to confine the outside use of such inform
ation to criminal prosecutions,
tax suits, and the like.
And this is true because of
the nature of banking,
as to which, by universal recognition, public confidence is essential. The plenary
power of the Comptroller over the conduct of the business and affairs of banks always has been considered
ample to assure reasonable protection to depositors
and the public.
"And so, as we think, while it must be decided that
the Secretary was author
ized to deliver the reports,
their use should be confined to an investigation of
the charges in
proper proceedings by the Commission
in the discharge of
its duties under the Act. And
this the Commission
now assures us is the length and
breadth of the purpos
e it has in mind. It says that
it does not desire
or intend to introduce the reports
in evidence and
that it will not make them public by
any other means.
This assurance we accept as conclusive
of this branch of
the case, and relying upon it we hold
that the Commission
may use the information at hand in
preparation for the hearin and to aid it in obtaining
g
the evidence believ
ed by it to be necessary and proper
in the hearing on
its notice to Transamerica to show
cause why its regist
ration statement should not be
suspended."




10/8/56
The Board has previously
made reference to the interests
requiring consideration in
our deliberations. In particular,
we must consider the
interest of respondent in having available to it all relevant
material reasonably calculated to
assist in the conduct of
its case, and also the interests of
non-parties, including other banking establishm
ents and the
public, giving to each appro
priate weight under the circumstances. This, the Board
feels, it has done. The reasoning
of the Board in reach
ing its decision in this matter has been
well expressed by Lord
Chancellor Simon of the English House.
of Lords in Duncaav.
Cammell, Laird & Co., (1942) A.C. 624,
642, when, in discussing
the nature and conditions of the
privilege to withhold produ
ction of official documents on
grounds of public inter
est, he stated: "When these conditions are satisfied and
the minister feels it his duty to
deny access to mater
ial which would otherwise be available,
there is no question but
that the public interest must be
preferred to any private considerat
ion."
In addition to the foreg
oing reasons requiring the Board's
refusal to produce the
information requested in paragraphs
numbered 1. and 2., the
Board is of the opinion that, in view
of the issues of
fact suggested by the Notice of Institution
of Proceeding and
of Hearing Therein, and the Statement of
Particulars with Respect to Legal Authority and Jurisdiction
and Matters of Fact
and Law Asserted, filed herein on August
30, 1956, the
information demanded is irrelevant to any issue
involved in this matte
r. The information demanded in paragraphs
numbered 1. and 2., has
no bearing on the questions raised concerning respondent's condi
tion, such questions having been raised
on the basis of
the fact set forth and referred to in the Notice
and Statement.
Further, the Board will be required, as any other
litigant, to substantia
te its inquiry during hearing. At that
time, respondent will
have ample opportunity to challenge the
basis of the Board
's inquiry, as it is then presented. The course
of presentation
adopted by the Board's representatives during hearing may suggest the
relevancy of portions of the information demanded in paragraphs
numbered 1. and 2. If so, upon such showing,
the matter will
then be properly addressed to the attention of the
trial examiner. At
the present time, no good cause being shown,
and failing a showi
ng of relevancy, the demands made in paragraphs
numbered 1. and 2.
are denied.
Respondent's paragraph numbered 3. demands production
of a
"list of all banks
in the United States, stating their names and
addresses, whose
applications for membership in the Federal Reserve




2082
10/8/56

-17-

System have been approved by
the Board of Governors within
the last ten years, or such
shorter period as the records
may be available, such approv
al being made on condition
that the capital of such applic
ant be increased, . . • •tt
In addition, as to these banks, respon
dent demands copies
of the balance sheet of
each for named years; copies of
"annual operating ratios"
for each such bank for the same
period; statement as to the amount of capita increa
l
se required, the time allowed
method
used
for
and
such increase,
and a statement of such
other conditions of membership as
the Board may have impose
d. The Board declines to furnish
the information demand
ed in said paragraph numbered 3., for
the reason that, despit
e the general statement of "good cause
and scope of inquiry"
contained in respondent's memorandum in
support of this motion, the
Board holds that, in fact, respondent has failed to establ
ish the relevancy of the materials
demanded to any issue of fact
or law raised in this proceeding.
Our earlier statement
as to a possible showing of relevancy is
equally applicable
here. Moreover, the materials, as described,
are of a confidential
nature, consisting of unpublished information in the Board's posses
sion, which, for the reasons set forth
at length in respon
se to the demands in paragraphs numbered 1.
and 2., should not
be made public, and thus, on the grounds of
privilege, are not susceptible to demand for production.
Paragraph numbered 4. demands a "list of the last twentyfive banks in the
United States, or such lesser number with respect to which the
records are available, stating names and addresses, which were admitted to membership in the Federal Reserve
System, . . . ." In addition sub-paragraphs (a), (b), (c) and
(d) demand, as to these twenty-five banks, detailed information
of a nature similar
to that demanded in paragraphs numbered 1.,
2. and 3. As to the
names and addresses of the last twenty-five
banks admitted to
membership in the Federal Reserve System, together with copies of
the balance sheets of each such bank for
each of the past ten
years, or for such years as available, such
data is published
information available to the public generally,
including respondent, thus not requiring production pursuant to
this demand. However,
it appearing that this information can
possibly be compiled with greater facility and speed by the
Board than by respondent, compilation of the information requested in paragraph numbered 4., with the exception of subparagraphs lettered (b), (c) and (d), has been ordered for the
years since such banks
were admitted to membership in the Federal
Reserve System, and will be forwarded to respondent upon completion.
(In this connection it
has been assumed that respondent's Demand




2093
10/8/56

-18-

refers to State member banks of the Federal Reserve System.)
As to sub-paragraph lettered (d), the information therein
requested is available in the materials requested in subparagraph lettered (a). The Board is of the opinion that
the information demanded in sub-paragraphs lettere (b)
and
d
(c) of paragraph numbered 4., not being publish
ed information, and being of such nature as to require its being held
in confidence, for the reasons previously given in connection with withholding privileged materials, are not susceptible to demand for production.
In respect to respondent's paragraph numbered 5., demanding a "list of all matters now pending before or under
consideration by the Board of Governors relating to the
adequacy of capital of member banks,
. • .", together with
a demand for further detaile information set forth in subd
paragraphs lettered (a), (b), (c) and (d), the demands of
said paragraph, and said
sub-paragraphs thereof, are denied.
The Board's refusal to furnish
this information follows from
its conclusion, reached
after study of the demand and memorandum in support thereof, that "good cause" for such production is not shown, nor, in the opinion of the Board, is
such information relevant
to any issue raised. Further,
the information demande
d is privileged for the same reason
and to the same extent
as discussed in our rulings on demands
numbered 1. through 4. In Heiner V. North American Coal Corp.,
3 F.R.D. 63 (W.D. Pa., 1942), the Court succinctly stated the
conditions precedent to the production of materials, which conditions the Board fails to find existing here. The Court stated:
If

• • • (the applicant) must show good cause for the order,
must designate the documents desired, and must show that
they are not privileged
and are material to any matter
involved in the action."
The Board finds
respondent's paragraph numbered
cient in regard to such requirements.

5. wholly defi-

In respect to respondent's paragraph numbered 6., and in
particular, the demand for
a "list of twenty-five member banks
of comparable size to
respondent bank and located in communities
whose population range
between 150,000 and 300,000, . . • .",
and respondent's sub
-paragraph lettered (d) calling for the
balance sheets as of
December 31 for each of such banks for the
past ten years, or such
shorter period as the records may be
available, such materia
l is published information and is available




20S4
10/8/56

-19-

from several sources including the Rand
McNally International
Bankers Directory. However, for the reason
s given in responding to the demands made
in paragraph numbered 4., the Board
has ordered prepared a
list of approximately twenty-five member banks, whose deposi
ts are comparable in volume to respondent
bank and located in communities with
populations ranging approximately between 150,000 and 300,000. In
addition, copies of the
balance sheets for each
such bank as of December 31 for each year,
since 1951, for which
records are available, together with the
list of banks, will be forwarded to respon
dent upon completion.
As to the demand contai
ned in sub-paragraph (a), for a breakdown
of size of deposits by percen
tages, this information is not in the
Board's possession. Furthermore,
if available, such information
would be unpublished inform
ation and, as such, privileged and, for
the reasons previously
given in connection with withholding privileged materials, not suscep
tible to demand for production. The
demands contained in sub-para
graph (b), for the ratio of time deposits to total deposi
ts, sub-paragraph (c), for a distribution
of bonds by maturi
ties, sub-paragraph (e), for copies of the annual
operating ratios for each
of these banks, and sub-paragraph (f),
for the dollar amount
of loans classified at the last examination as
specially mentioned; substandard, doubtf
ul or loss, are refused on
the grounds that the
information demanded, in relation to the banks
specified, is irrelevant to any issue now presented
in this matter.
The course of
presentation adopted by the Board's representatives
during hearing may sugges
t the relevancy of portions of the information demanded. If
so, upon such showing, the matter will then be
properly addressed to
the attention of the Trial Examiner. However,
the demand must fail
for the additional reason that, the materials
listed being unpubl
ished information, for the reasons previously
given, it is not suscep
tible to demand for production.
In response to respon
dent's demand numbered 7. for a "list of
all member banks,
showing names and addresses, of which George M.
Walker was the examin
er in charge during any of the last five
years", the Board has
ordered that a list containing this information be prepared and
forwarded to respondent.
The denial by the
Board of any demand for production made by
respondent in either
motion here under consideration, on grounds
of lack of relevancy
or on grounds of privilege or confidentiality
of the subject matter
, is without prejudice to the right of the
respondent at a later
time in the hearing to submit any particular
question to the Trial
Examiner if the respondent is in a position
to show, by reason of
subsequent developments or testimony in the
hearing or otherwise,
a necessity for further reconsideration of
any such matter.




2085
10/8/56

-20ORDER

For the reasons set forth in the foregoing statement,
IT IS ORDERED,
1. That respondent's Motion for Production of Records
Relating to This Proceeding be and the same hereby is denied.
2. That respondent's Supplemental Motion for Production
of Documents and Records be and the same hereby is denied in
part and granted in part, as follows:
The demands for production contained in paragraphs numbered 1., 2. and 3. are denied. The demands for production contained in sub-paragraphs lettered (b), (c) and
(d) of paragraph numbered 4. are denied. The remaining
demands of paragraph numbered 4. are granted to the extent indicated above in the Board's Statement. The demands for production contained in paragraph numbered 5.
are denied. The demands for production contained in
sub-paragraphs lettered (a), (b), (c), (e) and (f) of
paragraph numbered 6. are denied. The remaining demands of paragraph numbered 6. are granted to the extent indicated above in the Board's Statement. The demand for production contained in paragraph numbered 7.
is granted.
This 8th day of October, 1956.
By order of the Board of Governors.

(signed ) Merritt Sherman
Merritt Sherman,
Assistant Secretary.
(SEAL)
Washington, D. C.
October 8, 1956.

All of the members of the staff except Messrs. Sherman, Kenyon,
and Fauver then withdrew
from the meeting.




20SC
10/8/56

-21Pursuant to the understanding

at the meeting on October 1, 1956,

there had been sen
t to the members of the Board copies of
a memorandum
from Mr. Fauver
dated October 5 giving the names of Fed
eral Reserve
Bank Class C
directors and Board-appointed Federal Res
erve Bank branch
directors whose terms
were to expire at the end of 1956 and who woul
d
be eligible for
reappointment under the Board's current policy
relating
to length of ser
vice of directors.
After a discussion, the following
persons were reappointed by unanimous
vote as Class C directors of the respective Federal Reserve Banks indicated, each
for a term of three years beginning January

1, 1957:
Name

Bank

James R. Killian,
Jr.
Lester V. Chandler
Alonzo G. Decker, Jr.
Harllee Branch, Jr.
J. Stuart Russel
l
Leslie N. Perrin
Oliver S. Willham
Hal Bogle
A. H. Bravner

Boston
Philadelphia
Richmond
Atlanta
Chicago
Minneapolis
Kansas City
Dallas
San Francisco

The following persons 'were reappointed by unanimous vote as directors
of the respective Federal Reserve Bank
branches indicated, each for a term of
three years beginning January 1, 1957:
Name
Anthony Haswell
Theodore E. Fle
tcher
William H. Grier
Adolph Well, Sr.
McGregor Smith
Frank B. Ward
E. E. Wild




Branch
Cincinnati
Baltimore
Charlotte
Birmingham
Jacksonville
Nashville
New Orleans

208?
10/8/56

-22Name
J. Thomas Smith
T. Winfred Bell
David F. Cocks
John D. Williams
D. F. Stahmann
Clarence E. Ayres

Branch
Detroit
Little Rock
Louisville
Memphis
El Paso
San Antonio

The following persons were reappointed by unanimous vote as director
s
of the respective Federal Reserve
Bank
branches indicated, each for a term of
two years beginning January 1, 1957:
Name

Branch

Carl McFarland
Ray Reynolds
Phil H. Lowery
Manville Kendrick
Charles Detoy
William H. Steiwer, Sr.
Geo. W. Watkins

Helena
Denver
Oklahoma City
Omaha
Los Angeles
Portland
Salt Lake City

The foregoing actions were taken
with the understanding that in each
case the appointment was made subject
to a check by Chairman Martin with the
Chairman of the Federal Reserve Bank
concerned and that announcement of the
appointments would not be made by the
Board until such time as the check had
been completed.
The members of the
staff then withdrew and the Board went into
executive session.




The Secretary's Office later was
informed by the Chairman that during
the executive session the following
actions were taken:
The following persons were designated as Chairmen and Federal Reserve
Agents at the Federal Reserve Banks.

20SS
10/8/56




-23indicated for the year 195
7 and the compensation of each as Chairm
an and Federal Reserve Agent was
fixed on the uniform basis for the sam pos
ition at all
e
Federal Reserve Banks, i.e
., the same
amount as the aggregate
of the fees payable during the same per
iod to any other
director for attendance correspon
ding to
his at meetings of the boa
rd of directors,
executive committee, and other committee
s
of the board of directors:
Name
Robert C. Sprague
William J. Meinel
Arthur B. Van Buskirk
John B. Woodward, Jr.
Walter M. Mitchell
Bert R. Prall
Leslie N. Perrin
Raymond W. Hall
Robert J. Smith
A. H. Brawner

Bank
Boston
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
Minneapolis
Kansas City
Dallas
San Francisco

The following persons were appointed
as Deputy Chairmen of the Federal Reserve
Banks indicated for the year 1957:
Name

Bank

James R. Killian, Jr.
Henderson Supplee, Jr.
Alonzo G. Decker, Jr.
Harllee Branch, Jr.
J. Stuart Russell
Caffey Robertson
0. B. Jesness
Joe W. Seacrest
Hal Bogle
Y. Frank Freeman

Boston
Philadelphia
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

It was agreed to request Chairman
Alexander of the Federal Reserve Bank of
St. Louis to ascertain and advise whether

2089
10/8/56

-24Mr. Ethan A. H. Sheple
y, Chancellor of
Washington University, St.
Louis, Missouri,
would accept appoin
tment, if tendered, as
Class C director of the
St. Louis Reserve
Bank for the threeyear term beginning
January 1, 1957, with the unders
tanding
that if he would accept
, the appointment
would be made, that Mr. She
pley would be
designated as Chairman and Federal Res
erve
Agent of the Bank for the year 195
7, and
that his compensation would be fix
ed on
the same basis as for the same positi
on
at other Federal Reserve Banks.
It was also agreed to request Chairman Virden of the Federal Reserve Bank of
Cleveland to ascertain and advise whether
Mr. Joseph H. Thompson, President of The
M. A. Hanna Company, Cleveland, Ohio, would
accept appointment, if tendered, as Class
C director of the Cleveland Reserve Bank
for the three-year term beginning January
1, 1957, with the understanding that if he
would accept, the appointment would be made.
In addition, the Secretary's Office
was informed by Governor Shepardson that
during the executive session the Board approved the following salary increases for
members of the senior staff, effective
October 8, 1956:

Name and title

Basic annual salary
From
To

Winfield W. Riefler,
46,
Assistant to the Chairm
000
a
n4;
18,000
Woodlief Thomas, Eco
nomic Adviser to the Board
16,000
18,
000
Elliott Thurston,
Assistant to the Board
16,000
18,000
S. R. Carpen
ter, Secretary
16,000
17,000
George B. Vest, Gen
eral Counsel
16,000
18,000
Ralph A. Young,
Director, Division of Research
and Statistics
16,000
18,000
Arthur W. Marget,
Director, Division of International
Finance
16,000
17,000
George S. Sloan,
Director, Division of Examinati?ns
16,000
17,
000
R. F. Leonard,
Director, Division of Bank Operations
16,
000
18,
000
Edwin J.
Johnson, Controller, and Director, Division
of Personnel
Administration
14,000
15,500
L. P.
Bethea, Director, Division of Administrative
Services
14,000
15,000



2090
10/8/56

-25The meeting then adjourne
d.
Secretary's Note: Governor Szym
czak,
acting as alternate to Gove
rnor Shepardson, approved on beha
lf of the Board on
October 5, 1956, the followin acti
g
ons
relating to the Board's staff whic
h had
been recommended in memorand
a from appropriate individusis concerned:

Appointments, effective
as of the respective dates of assuming duties
Edna L. Stoll, as
Records Clerk in the Office of the Secretary,
with basic salary at
the rate of $3,415 per annum.
Robert A. Ferris, as Elev
ator Operator in the Division of Administrative Services, on
a temporary basis for a period of six months, with
basic salary at the
rate of $2,600 per annum.
Eleanor Wilson Yates,
as Cafeteria Helper in the Division of Administrative Services, on
a temporary basis for a period of two months, with
basic salary at the
rate of .132,600 per annum.
Salary increases

effective October

Name and title

7 1956

Division

Basic annual salary
From
To

Legal
Verna P. Ryon, Secretar
y 1/

$3,805

p14-1
(4.

080

Research and Statistics
C. Lavon Watson,
Clerk

3,600

3,755

2,600

3,175

Administrative Services
Wilhelmina K. Steele, Oper
ator, Key Punch

Title changed from Stenographer.
Title changed from Elevator Operator for a period of six mont
hs
from October 7, 1956.